Most of us think of logistics as a one-way street. Products are manufactured, packaged, stored in a warehouse, sold, and then shipped off to the customer ... end of story. Yet for many logistics managers today, that's not the end of the story. In addition to managing outbound goods, they also are responsible for reverse logistics--the flow of returned goods and packaging, including customer service and final disposition of returned items.
The need to manage waste materials and returned goods is growing in all kinds of industries. Today, companies like Xerox, Mobil, Home Depot, and Ethan Allen Furniture - to name just a few - have recycling programs that meet the needs of their individual industries. There are many reasons for the explosive growth of what's come to be known as "reverse logistics" over the past five years or so. The most prominent is increasing public awareness of the social costs of excess waste. A large-scale recycling program, therefore, generates goodwill among consumers and industrial customers. As support for recycling grows, moreover, companies want to be perceived as good citizens that are committed to protecting the environment. Another important reason is the need to control costs. Frequently, manufacturers treat recovery of products and packaging as an afterthought. A well-managed reverse-logistics program, however, can bring enormous savings in inventory-carrying, transportation, and waste-disposal costs.
For these and other reasons, more and more companies are launching reverse-logistics programs today. Unfortunately, it's often assumed that reverse logistics is simply a matter of reversing the outbound distribution process. In fact, recycling and returns management have their own unique and complex issues that affect logistics operations. A brief overview of those issues highlights the five main areas you should consider before starting a reverse-logistics program.
A related issue is what kind of resources you are willing to commit to a reverse-logistics program. The obvious answer is that the level of potential benefits will influence how much a company will invest in such a program. Too often, though, companies shortchange themselves by failing to devote sufficient time, money, and personnel to the project. "A lot of times, [reverse logistics] becomes a side job for somebody. It's not their focus or a high priority," says Cindie Vaughan, supervisor of reverse logistics for Consolidated Freightways.
If no one is proactively managing the process, it's bound to result in higher costs and missed opportunities for savings and profits. A solution for many companies that have limited resources for reverse logistics is outsourcing that function to third parties or transportation companies. It's up to the shipper, though, to examine the cost and service benefits, then decide how much of the process should be outsourced. "As with any outsourcing decision, it's a matter of being able to focus on your...